Optimization of investment management in Warsaw stock market

Janowicz Maciej, Orłowski Arkadiusz and Warzyński Franciszek Michał
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Janowicz Maciej: Warsaw Univesity of Life Sciences (SGGW)
Orłowski Arkadiusz: Warsaw Univesity of Life Sciences (SGGW)
Warzyński Franciszek Michał: University of Social Sciences

Przedsiębiorczość i Zarządzanie (Entrepreneurship and Management), 2014, vol. 15, issue 2, 143-156

Abstract: Application of simple prescriptions of technical analysis on the Warsaw Exchange Market (GPW) has been analyzed using several stocks belonging to WIG20 group as examples. Only long positions have been considered. Three well-known technical-analysis indicators of the market have been investigated: the Donchian channels, the Relative Strength Index, and Moving Average Convergence-Divergence indicator. Optimal values of parameters of those indicators have been found by „brute force“ evaluation of (linear) returns. It has been found that trading based on both Donchian channels and Relative Strength Index easily outperform the „buy and hold“ strategy if supplied with optimal values of parameters. However, those optimal values are by now means universal in the sense that they depend on particular stocks, and are functions of time. The optimal management of capital in the stock market strongly depends on the time perspective of trading. Finally, it has been argued that the criticism of technical analysis which is often delivered by academic quantitative financial science is unjustified as based of false premises.

Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:vrs:pizeam:v:15:y:2014:i:2:p:143-156:n:10

DOI: 10.2478/eam-2014-0023

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